Asian benchmarks drop after bear market hits Wall Street

TOKYO (AP) – Asian stocks fell on Tuesday after Wall Street fell into a bear market, indicating that major U.S. benchmarks and individual stocks fell 20% or more from a recent high for a period. prolonged.

Benchmarks fell in Japan, Australia, South Korea and China. The continued slide of the Japanese yen against the dollar has come to a halt.

At the center of the selloff was the US Federal Reserve, which is struggling to keep inflation in check. Its main method is to raise interest rates, a blunt tool that could slow the economy too much and risk a recession if used too aggressively.

Some economists believe the Fed could raise its key interest rate by three-quarters of a percentage point on Wednesday. That’s triple the usual amount and something the Fed hasn’t done since 1994.

“Another day to digest recent inflation data from the United States, and another day closer to the June FOMC meeting and global markets, we, as well as those here in Asia, have demonstrated that they dislike the current state of the global economy,” Robert Carnell, regional head of Asia-Pacific research at ING, said in a statement.

The Japanese Nikkei 225 fell 1.8% to 26,496.91. Australia’s S&P/ASX 200 fell 4.3% to 6,634.00 after reopening after a bank holiday on Monday. The South Korean Kospi fell 1.0% to 2,479.83. Hong Kong’s Hang Seng slipped 0.4% to 20,990.98, while the Shanghai Composite edged down 1.2% to 3,217.72.

The decline of the yen, recently to 135, the lowest level against the US dollar since 1998, adds to concerns about the fragility of the Japanese economy. Comments from Governor Haruhiko Kuroda expressing concern about its decline.

The Euro traded at $1.0426, down from $1.0409 previously.

“Against this backdrop, stocks in Asia are unlikely to be spared,” Tan Boon Heng of Mizuho Bank in Singapore said in a commentary.

On Wall Street, the S&P 500 index fell 3.9% to 3,749.63. That’s 21.8% below its record set earlier this year and now in a bear market. The Dow fell 876.05, or 2.8%, to 30,516.74 on Monday, after falling more than 1,000 points. The Nasdaq composite fell 4.7% to 10,809.23.

The decline was the first opportunity for investors to trade after having had the weekend to reflect on Friday’s news that inflation is getting worse, not better.

With the Fed seemingly compelled to get more aggressive, prices fell in a global rout for everything from bonds to bitcoin, from New York to New Zealand. Some of the steepest declines have been in what had been the big winners of the easier low-rate era, like high-growth tech stocks and other former investor darlings. Tesla fell 7.1% and Amazon 5.5%. GameStop fell 8.4%.

“The best thing people can do is not to panic and sell low,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, “and we’re probably not not at the lowest.”

Markets brace for bigger than usual rises, in addition to some discouraging signals about the economy and corporate earnings, including a record early reading on consumer sentiment soured by high gasoline prices .

The economy is holding up overall, but the danger is that the labor market and other factors are so hot that they will fuel higher inflation.

Wall Street’s realization that inflation is accelerating, not peaking, has propelled US bond yields to their highest levels in more than a decade. The two-year Treasury yield climbed to 3.36% from 3.06% late Friday in its second consecutive major move. It had previously hit its highest level since 2007, according to Tradeweb.

The 10-year yield has risen from 3.15% to 3.37%, and the higher level will make mortgages and many other types of loans more expensive. It hit its highest level since 2011.

Higher yields mean bond prices fall. This happens rarely and is a blow to older, more conservative investors who depend on them as the safest parts of their nest egg.

Some of the biggest hits have come from cryptocurrencies, which soared at the start of the pandemic as ultra-low rates encouraged some investors to pile into riskier investments. Bitcoin fell more than 14% from the previous day and fell below $23,400, according to Coindesk. It is back to where it was at the end of 2020 and down from a high of $68,990 at the end of last year.

In energy trading, benchmark U.S. crude fell 22 cents to $120.71 a barrel in electronic trading on the New York Mercantile Exchange. It gained 26 cents to $120.93 on Monday.

Brent crude, the international standard, slipped 29 cents to $121.98 a barrel.


AP Business Writer Stan Choe contributed.

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